India's Economy to Grow at 6.7% in FY25, Says ADB
India's economic expansion is expected to hit 6.7% in FY25, led by robust domestic consumption, increasing rural incomes, and softening inflation, the latest Asian Development Outlook (ADO) April 2025 report released by the Asian Development Bank (ADB) suggests. The estimate points to sustained economic resilience against global uncertainties, as the ADB also puts its estimate of the growth rate in FY26 at 6.8%.
Mio Oka, ADB's Country Director for India, stressed that India's strategic priority on employment generation and infrastructure has served to sustain the momentum. She also mentioned that tax incentives for the middle class and manufacturing regulatory reforms in recent months are expected to drive long-term growth.
The ADB report follows a slightly more subdued forecast from the Reserve Bank of India (RBI), which recently lowered its GDP growth estimate for FY25 to 6.5%. The RBI attributed the downward revision to uncertainties in global trade and policy environments.
Indian consumer sentiment is likely to improve, driven by softening inflation and increasing rural incomes. The ADB predicts inflation to decrease to 4.3% in FY26 and then to 4% in FY27. These trends would provide the RBI with more monetary policy space in the future. In a reflection, the central bank reduced its policy repo rate by 25 basis points to 6% on Wednesday its second-straight cut, amounting to 50 basis points across recent Monetary Policy Committee meetings.
On the sectoral side, the services sector is expected to lead the growth even further, particularly in export-oriented business-related services, education, and healthcare. Agriculture is also expected to continue its strength on the back of a good rabi (winter) crop, mainly wheat and pulses. The manufacturing sector, which had soft performance during the last year, is expected to pick up.
Public spending is also set to increase, with the introduction of a new urban infrastructure fund supported by an initial Rs 100 billion (USD 1.17 billion) allocation. Nevertheless, the ADB warned that external threats continue to exist, such as recently imposed US tariffs on Indian exports and volatile global commodity prices.
Although projections in the report were completed before April 2 US tariff release, it includes consideration of potential Asia-Pacific economies implications for trade shifts.
